May 21, 2019
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How Maine is looking to protect consumers from debt collectors

George Danby | BDN
George Danby | BDN

Gov. Paul LePage recently signed into law two updates to Maine’s Fair Debt Collection Practices Act. One of the updates is significant as it expands the scope of who the state considers a debt collector. Because of this legislation, more debt collectors will now need to get licensed and comply with a surety bond requirement prior to operating in Maine.

Here are the provisions of the new updates and how they relate to consumer protection in the state.

The updates

LD 1663 and 1677 were both enacted and signed Feb. 6 and will come into effect in May. Both introduce changes the debt collection act.

LD 1663 introduces a change to the definition of “Conducting business in this State” under Maine law. The change to the definition expands the meaning of conducting business in the state to include all solicitations of creditors by debt collectors. Previously, the definition only covered face-to-face solicitations.

Moreover, under the expanded definition, debt collectors collecting from consumers whose creditor is not located in Maine are now considered as conducting business in the state. Previously, creditors also needed to be in the state in order for this to be considered business in the state.

Why the changes matter

Both of these changes are significant because they apply to a larger number of debt collectors who, until now, were not required to get licensed. Under Maine law, debt collectors need to be licensed in Maine and comply with all applicable state laws and rules to “conduct business in the state.” This includes various licensing requirements, such as surety bonds.

As for LD 1677, this legislation will require debt collectors to possess information about the “total amount due at charge-off” when collecting debts. Previously, in order to collect a debt, they only needed to know the “principal” amount.

What the new licensing requirements mean for consumers

All debt collectors in Maine must be licensed at the Department of Professional and Financial Regulation. When applying for a license, new applicants must post a surety bond in the amount of $20,000 if they are undertaking direct collections, $15,000 for those whose activities are only limited to repossessions and $5,000 for letter-writing companies. When renewing their licenses, debt collectors may face bond amounts as high as $50,000, depending on the amount of their average gross collections over the year.

The surety bond is an important means of guaranteeing that licensed businesses and professionals comply with their legal obligations. It also serves as a guarantee to a collector’s clients that they have legal recourse against a collector who violates the conditions of the bond agreement.

Under the bond agreement, debt collectors in Maine are required to report to and pay their customers all the proceeds that are due and payable of the collections they have made in the previous month within 30 days after the end of each month.

They must also deliver any repossessed property within that same period. In addition, the surety bond also places on debt collectors the obligation to strictly and honestly comply with all provisions of state law. The bond is put in place for the use of any person or persons who may have a cause of action against the debt collector under one of the above conditions.

When a debt collector violates one of these provisions and thereby causes losses or damages to their customers, a claim can be filed against his or her bond for compensation. If a bond collector’s bond is $40,000, for example, the compensation extended to claimants can be as high as $40,000, provided there’s ground to ask for such compensation.

Due to the inherent risk in issuing bonds, surety companies always check applicants for bonds carefully before issuing one. When a collector has a bond, this is signal he or she is deemed reliable enough to be backed by a surety.

Since more debt collectors operating in Maine will now need to be licensed and bonded under the new legislation, consumers who work with collectors will be better protected.

Todd Bryant is the president and founder of Bryant Surety Bonds based in Doylestown, Pennsylvania. He is a surety bonds expert with years of experience in helping business owners get bonded and start their businesses.

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